Millennial Investors Favor Socially Responsible Businesses

(3BL Media/Justmeans) – Sustainable investing has experienced a compound annual growth rate of 104.6 percent from 2012 to 2014, according to The Forum for Sustainable and Responsible Investment. This growth is being driven, in part, by Millennials who prefer to invest in alignment with personal values. Since Millennials are poised to receive more than $30 trillion of inheritable wealth, fund managers are increasingly allocating resources to capture this emerging client segment.

Ernst & Young's new report titled, “Sustainable Investing: The Millennial Investor,” highlights the impact Millennials are going to have on the investment industry and suggests that businesses must gear up to support the coming surge of the Millennial generation through sustainable investing. According to a recent Morgan Stanley survey, 84 percent of Millennials cite investing with a focus on ESG impact as a central goal.

Greg Cobb, Director of Fixed Income for Boyd Watterson Asset Management, pointed out that the industry is moving from a passive investor population, which is dependent on the income from defined benefit and pension plans to a population that is self-funding via their defined contribution plans. These Millennials will demand more active involvement in their own investments as they wish to be more actively involved in controlling their own destiny. Along with this more active approach, will come more activist tendencies.

Additionally, according to a Morgan Stanley study, when compared with non-Millennial investors, Millennials are incorporating sustainability not only into investment decisions, but overall consumer behavior. Highlights:

  • Millennial investors are nearly twice as likely to invest in companies or funds that target specific social or environmental outcomes.
  • 29% of investors in their 20s and 30s seek a financial advisor that provides values-based investing.
  • 17% of Millennials indicate they seek to invest in companies that use high quality ESG practices, compared with 9% of non-millennial investors.
  • 15% of Millennials indicate they would exit an investment position due to objectionable firm activity, compared with 7% of non-Millennial investors.
  • 15% of Millennials indicate they would rather purchase products from a sustainable brand, compared with 7% of non-Millennial investors.
  • Millennials are achieving greater integration of their money and values by seeking personal fulfillment in their careers, applying a global consciousness to purchases, and investing in sustainable, impactful business models.

The EY report says that firms most adequately prepared to address sustainable investing and the intergenerational wealth transfer together will not only capitalize on the acquisition of new clients, but also effectively serve their current client base.

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